Saturday, February 19, 2011

Groupon Mania – Deal or No Deal?

Groupon's been all the buzz recently. Within the last few months, it turned down a $3 billion buyout offer from Yahoo! as well as Google's $6 billion offer. Not such a wise decision if you ask me, the company’s business model can be easily imitated by others, in fact, it already has. Numerous websites have popped up within the last year or so offering local deals. Of course, to add insult to injury, Groupon made 3 terrible (not to mention insensitive) Super Bowl ads. Bad move, especially with a pending $15 billion IPO.

Okay, enough of me giving them business advice that I'm clearly not qualified to do. For now, I'd like to believe the executives at Groupon have some special secret no-fail business plan that the rest of us can't even dream of.

Anyways, I have been on the Groupon train since 2009. When I first started, Groupon wasn’t getting all of the media attention it’s getting now, and like most people, I thought it was a very unique concept. Not only are the discounts generous, the element of supporting local businesses is a huge plus. It’s a great site to discover small local mom and pop places. In fact, my first purchase was to a restaurant that I had been dying to try. Awesome, right? In a blink of an eye, I joined Living Social (now backed by Amazon), DealOn, and BloomSpot. Sites like Yelp, Gilt, and , which I was already a part of, began to issue exclusive deals to members, too.

Back then, I was less careful with my money than I am now, but I was no compulsive shopper, either. Even so, I soon discovered that these deals from various websites are oddly tempting. Well that’s because they play with your minds by employing two major tricks: large discount taken off of the sticker price and the sense of urgency they create to force you into making a purchase quickly. I wasn’t (and still am not) used to that. When I see something I like, I always sit on it for a week or longer to reduce the amount of compulsive decisions I make. But the deal will expire if I do that with group buying websites! Sailing lessons? Gym membership? Restaurants? Gadgets? I want it all!

Well, the good news is that I realized they were playing with my mind pretty quickly. My interest in Groupon and other similar sites started dying as each new group deal website popped up. Now I make it a rule to ONLY buy things that I was already going to purchase anyways. For example, I’ll purchase a deal for a haircut if I know for a fact that it’s cheaper than I would usually pay for. So buying a $60 Groupon for $120 worth of hair salon services doesn’t count. I don’t need the additional services.

As with most things related to personal finance, discipline plays a big part in keeping spending down while on these deal sites’ mailing list. I focus on a mental list of what I need, so when I look through these emails, I don’t get distracted. I have to admit, this type restriction is pretty boring when you’re faced with so many variety of products. So if you still want to get some fun out of Groupon, Living Social, etc., set a budget or limit the number of coupons you can purchase. But if you get tempted easily, I suggest not looking at all. Costs can really add up. Unsubscribe so you don’t end up spending more when you THINK you’re saving.

Okay, so I’ve been dogging on Groupon all day long, but I’ve got one good thing to say about it. The company’s actually got decent customer service. I compulsively purchased something last year, so I decided to give them a call to try to return the coupons. They were polite, but only agreed to give me credits back. If you’ve got buyer’s remorse, go ahead and give them a call. In the meantime, I’ll be looking out for that haircut deal with the credits I was given.


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